Peru Monetary Policy

Peru: Central Bank continues to focus on reserve requirements

April 11, 2013

At its 11 April monetary policy meeting, the Central Bank left the reference rate unchanged at 4.25%, in a decision widely expected by the market. The decision marks the 23rd consecutive month in which the Bank has refrained from changing the main policy rate.

As in previous statements, monetary officials argued that inflation will slow in the coming months and gradually converge to its 2.0% target. In addition, authorities stated that recent economic indicators show that growth has stabilized around its sustainable long-term rate. The next monetary policy is scheduled for 9 May.

Meanwhile, in a context of rapid economic growth and ample global liquidity, on 27 March, the Central Bank decided to raise the average reserve requirements ratio by 0.25 percentage points on foreign currency deposits. The decision, which is effective as on 1 April, comes on top of the 2.25 percentage-point hikes already implemented since January. With this move, monetary officials seek to stem the impact of capital inflows from abroad on the expansion of credit and, consequently, on the appreciation of the local currency.

A majority of panellists polled by LatinFocus Consensus Forecast expect that monetary authorities will maintain the reference rate unchanged this year, with a year-end projection of 4.33%. For 2014, the participants expect the monetary policy rate to end the year at 4.62%.

Peru’s trade balance recorded a USD 1.1 billion surplus in December, a substantial increase from November’s USD 588 million surplus and matching the USD 1.1 billion surplus recorded in the same month of last year.
Growth in exports moderated considerably in December, decelerating to 7.3% year-on-year from November’s 21.4% expansion.